New Beverage of Choice For Political Risk Analysts: Mexican Kool-Aid

Ian Bremmer is on the take.

Eurasia Group released its “Top Risks for 2013” report last week. It’s interesting, and it’s worth reading if political risk is your sort of thing. But pretty early on this part stood out to me (boldface emphasis is mine):

“It’s worth breaking down emerging markets into three broad categories:

A – becoming developed. These are governments with the tools to respond effectively to domestic and international challenges and continue to put policies in place that make investment more attractive over time, reducing the chances of sudden crises. Many emerging markets in Latin America are in this basket. In part, that’s a structural advantage: the lack of geopolitical turmoil in the region and the ability of many Latin American governments to “pivot” in a more fragmented globalization environment. But it’s also a result of the work of three leaders who enter 2013 with significant political capital: post-Lula, Brazil’s Dilma Rousseff; post-Uribe, Colombia’s Juan Manuel Santos; and, the most exciting story, post-Calderon, Mexico’s Enrique Peña Nieto–one of the only leaders in the emerging market space willing and able to advance structural economic reforms.”

I’ve been a long-time follower of the Eurasia Group crowd and generally am in line with what they have to say about the global state of affairs, but to call Enrique Peña Nieto “the most exciting story” of Latin America, and “one of the only leaders in the emerging market space willing and able to advance structural economic reforms”…well that just tells me that the best case scenario is that Eurasia Group has lost the plot on all things Mexican.

The worst case scenario, of course, is that they’re being pimped.

Let’s not forget that this is a man who, aside from having familial links to the PRI that ran Mexico uninterrupted for seven decades, won the presidency with AT MOST 38% of the vote. Such popular will hardly connotes a leader who might be called “exciting”, “charismatic” or any other such accolade. Further, there is absolutely zero proof that he is indeed “willing and able” to advance structural economic reforms.

Let’s put this another way: suppose I tell you, “I’m smart.” Does that make me smart? Not at all. It just makes me someone who claims to be smart. But suppose I offer you something in exchange for you to pass the message along that I’m smart and you go off and tell a whole bunch of other people, “Hey, that Ulysses, he’s pretty smart.” And someone asks you, “Oh really? How do you figure?” And you say, “Because he told me so.” This still doesn’t make me smart.

But it does make me your pimp.

And that’s the long and short of what’s happening to the global policy wonk apparatus, which includes Eurasia Group and anyone else prematurely touting the new Mexican administration. EPN and Co. have not done a single thing yet, but his advisers have obviously made the rounds to the world’s opinion makers to sell the administration as “smart” and for whatever reason it seems to be working.

Look, here’s what’s happening really. Last year, at some point in between the Mexican presidential election in July and inauguration in December, Enrique Peña Nieto, accompanied by his top advisers, most notably Luis Videgaray, went on a roadshow to New York City and Washington, D.C. to have a few closed-door conversations with the opinion makers who matter. Approximately, this in all likelihood means the US State Department, Brookings, Carnegie, Woodrow Wilson Center, some of the big fish Wall Street banks, Eurasia Group, Council on Foreign Relations, Roubini…I’m probably missing a few, but you get the general idea. What exactly happened in those meetings I do not know, but I think I can guess: EPN kept his mouth shut while Videgaray pulled out his M.I.T. degree, slapped it on the table as though it were his cock and invited the gringos to go ahead and try to stump him. When all the dust settled, everyone was impressed with each other and they all agreed that they looked forward to jerking, I mean working, with each other.

Pimps. All of them.

Frankly, I hope EPN proves me wrong. I hope he does deliver and puts Mexico on a track toward some notion of sustained development. But Mexicans are one of those sorts of societies that have extreme difficulty telling you like it is, often because the truth is so painful. And so when I hear EPN make this promise or that promise, I really have a hard time taking it seriously because the default assumption is that whatever is coming out of any Mexican politician’s mouth–particularly one from the PRI–is a lie that is simply oriented to whatever it is you want to hear. I guess that’s the default assumption for any politician anywhere, but at any rate, praising this man before he’s even done anything is a bit…well, I don’t know. It’s just striking to me that Eurasia Group can be so cavalier in its support for him before he’s even had a chance to deliver on or break any of his promises.

Optimism trumps realism. And the West, particularly the US, have made it clear too many times that they don’t want realism out of Mexico. They want optimism.

Ah, well enough about Mexico.

Because what Eurasia does get slightly more correct, I believe, is its characterization of the emerging markets space:

A. Becoming Developed: Brazil, Colombia, Mexico, Turkey, Oman, UAE, South Korea, Philippines.

B. Still Emerging: Indonesia, Egypt, Iraq, Saudi Arabia, Thailand, Peru, South Africa, China.

C. Backsliding: Russia, Ukraine, Pakistan, Argentina, Venezuela, most of North Africa.

That’s surely just a sampling of the countries for each of the three categories as there are some notable economies totally unmentioned (Chile comes to mind as certainly belonging in group A).

The risk list is generally rather light on Latin America, which makes me wonder: the odds that both Venezuela and Cuba will experience a regime change this year very high. What happens then? These events will not be as profound in their influence as the Arab Spring or the Eurocrisis or North Korean antics, but it’s worth asking what the ripple effects might be.

Here’s one: look for the state of Florida to gradually vote more Democrat.